Capital Shift From NVIDIA To SPY

NVIDIA is showing continued weakness, while the S&P 500 index is performing better. The SPY (S&P 500 ETF) is holding strong at 647.64 (-0.2%), with an optimistic outlook. Recent option trades reveal a positive delta volume of 1.6 million, and institutional investors appear to be bullish. The fear gauge for options is low, with downside hedging costs at only 1.1%, below the normal 1.5%. In contrast, NVIDIA (NVDA) is struggling after its earnings report, with shares down 1.1% to 178.25. The sentiment is negative, shown by a delta flow of -1.1 million options, with little sign of buying interest. Although hedging costs for NVDA have dropped to 3.6%, they remain higher than average, reflecting ongoing caution. This difference suggests capital is moving away from NVIDIA and into the broader SPY index. NVIDIA is facing gradual selling as investors reduce their exposure. In contrast, the overall stock market shows a positive outlook, with less hedging against the S&P 500. This gap implies that NVIDIA’s performance may not significantly affect the overall market. Traders should monitor whether NVIDIA’s issues will impact the wider tech sector or if the rotation into SPY will buffer the index from losses. The divide between NVIDIA and the S&P 500 has increased as of August 29, 2025. While NVIDIA is experiencing profit-taking after its earnings, the broader market is stabilizing thanks to a more optimistic economic outlook. The SPY’s strength is likely supported by the Federal Reserve’s recent balanced message at the Jackson Hole symposium, easing concerns about aggressive rate hikes.

NVIDIA Expectations Versus Reality

The overall market sentiment remains positive, with the Volatility Index (VIX) close to a low of 13.5, indicating that investors feel relatively calm. The S&P 500 has risen nearly 14% this year, and capital is shifting into less volatile sectors like industrials and financials. Traders may find value in buying broad index call spreads on SPY to capture potential gains while managing risks. For NVIDIA, the situation is one of high expectations clashing with reality, similar to trends we observed with leading tech stocks in late 2023. Despite strong earnings, its forward price-to-earnings ratio hovering above 65 has led investors to cut back rather than expand their positions. A potential options strategy could involve a bearish put spread, allowing traders to benefit from a slight decrease without assuming too much risk. This split creates a classic pairs trade opportunity in the coming weeks. Traders might consider taking a long position in the resilient S&P 500 through SPY options while simultaneously buying puts on NVIDIA to guard against tech-specific downturns. It’s crucial to watch if NVIDIA’s struggles start to affect the broader Nasdaq 100, which has remained relatively stable so far. Create your live VT Markets account and start trading now.

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